A Melbourne group has bought the Westend backpackers’ hotel in Sydney’s CBD for $19 million and plans to refurbish it and to turn it into a hotel.
The buyer from Victoria, who was not named, was one of 300 parties who asked about the backpacker hotel at 412 Pitt Street during the on-market campaign.
CBRE Hotels’ Andrew Jackson and Rob Cross negotiated the sale and said interest in the hotel was phenomenal, thanks to high occupancy levels and little new supply planned in the city.
“We received a staggering 300-plus inquiries and took over 45 groups through the hotel over the course of the campaign, resulting in 13 offers to purchase being received,” Mr Jackson said.
The buyer intends to reposition the hotel as a “limited service hotel offering to take advantage of the strong Sydney hotel market fundamentals,” according to CBRE.
“Strong demand levels in Sydney have produced consistently high occupancies and escalating hotel average daily rates (ADRs). With minimal new supply mooted in the short term, occupancies are likely to remain high with positive ADR growth,” Mr Cross said.
“This strong trading outlook is drawing huge interest from both domestic and offshore buyers, with Asian buyers having been particularly active in the first quarter of this year. This is driving the strong pricing being achieved for hotel assets in strong centres such as Sydney.”
Sydney and Melbourne in particular are doing very well, with occupancy reaching record levels and room rate growth, according to CBRE’s latest Hotel Trends for the Asia Pacific report.
But most hotels are being purchased by foreign investors.
“Asian buyers were particularly active in Australia in Q1 2015 and completed a number of sizeable deals. Prices hit new highs, supported by the shortage of saleable good quality and well located assets,” the report said.